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A new segment algorithm based on the pixels intensity and spatial information is proposed in this paper. The algorithm has three main steps. The first step is image preprocessing. After the points in the neighborhood of each image pixel are classified, their distributing situation are used to estimate the image pixel's location, in the center or near the boundary of a region. Each pixel's gradient magnitude is adaptively adjusted according to its location. The second step is image segmentation. Watershed transform is performed on the adjusted gradient magnitude image to obtain the initial segmented regions. The last step is regions merging. Pairs of adjacent regions are merged if they have small cost function. For each pair of adjacent regions, the cost function is calculated according to the strength of their shared boundaries, the ratio of smaller region area to shared boundary length, and the homogeneity. Experimental results indicate that this algorithm provides a good segmentation for segment-based image coding.